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How to Avoid Credit Card Interest | Credit Cards

Key Takeaways

  • The best way to avoid credit card interest is to pay your balance on time and in full each month.
  • By timing your purchases, you can take best advantage of your credit card’s grace period.
  • Even if you can’t afford to pay your full balance, you can take steps to avoid or reduce interest you’d pay.

Credit card interest is expensive, but you can reduce or eliminate it.

Credit card interest rates may edge lower in 2024 with expected federal rate cuts, but credit card interest, even at a lower rate, is best avoided. After all, any interest you pay is still money out of your pocket.

Ideally, aim to pay off balances each month to avoid interest charges. But if that isn’t possible, there are ways to reduce the interest you pay.

Why Avoid Credit Card Interest?

Credit card interest rates are often some of the highest rates you can pay to borrow money. What makes credit card interest so troublesome is compounding.

When you’re charged interest on your credit card, the amount is added to your balance. And when you carry that balance month to month, you’ll pay interest on interest. That’s part of why it’s so hard to get out of credit card debt.

The best way to handle credit card interest is to avoid it in the first place. That means taking advantage of your card’s grace period and other no-interest options, always paying your bill in full and on time, and moving balances to 0% balance transfer cards as necessary.

How to Make the Most of Your Credit Card Grace Period

Credit card purchases have a grace period of at least 21 days with no interest charges between the end of your card’s billing cycle and when your credit card bill is due. In other words, you won’t be charged interest on your credit card balance until after your payment due date.

If you carry a balance, you will lose your grace period. Interest charges will apply to the unpaid portion of your balance and to purchases in the new billing cycle starting on the date of each purchase. Note that credit card grace periods only apply to purchases, not to cash advances or balance transfers.

You can use your credit card’s grace period to your advantage by timing a purchase for the day your statement period opens. Then you get more than a month and a half to pay it off before interest charges apply – your entire statement period, plus the grace period of at least 21 days.

Need more time with no interest? Some credit cards offer introductory interest-free periods of 12 to 21 months. With a 0% annual percentage rate card, you can make monthly payments on your balance and won’t be charged interest until the introductory period ends and the regular APR applies.

How to Avoid Paying Interest on a Credit Card

The simplest way to avoid credit card interest charges is never to carry a balance. You can do this by:

  • Paying your bill in full. If you pay your statement balance on time each month, you won’t be charged interest on your transactions. “Paying your credit card in full every month is the best way to avoid interest payments,” says John Schmoll, founder of the personal finance website Frugal Rules.
  • Moving debt to a new balance transfer credit card. When you’re faced with a balance you can’t pay in full by the due date, a 0% APR on balance transfers can save on interest. However, you will likely pay a fee, usually 3% to 5%, to transfer each balance.
  • Timing major purchases. Before you book a big trip or buy a houseful of furniture, look at your budget and card statement closing date to take advantage of the grace period. 
  • Opening a 0% introductory APR card. If you need more than a month or two to pay for your purchases, a 0% APR card can offer an interest-free way to do so. Just be sure you can pay off the balance before interest charges apply.

If you’re planning a balance transfer, consider whether you can avoid running up card balances again, says Jeff Richardson, VantageScore’s senior vice president of marketing and communications. “A concern is going back to that card that doesn’t have a balance,” Richardson says. “Now you have two balances, two interest rates, and it really will begin to be a challenge to meet those obligations.”

How to Reduce Your Credit Card Interest 

If completely avoiding interest isn’t your reality right now because of financial pressures, how can you reduce the credit card interest you pay? Decreasing your debt by consolidating it or making extra monthly payments can help alleviate interest-rate stress.

“First and foremost, pay down those balances as low as you can,” Richardson says.

Here are some ways to reduce your credit card interest charges:

  • Choose a debt payoff strategy to lower your balance and your interest charges. Use the debt avalanche, snowball or blizzard method to pay off credit card debt. Choose what will work best for you and get started.
  • Make multiple monthly payments to chip away at a big balance. Repaying your full balance might be more than you can handle at once, but could you split it up over two paychecks or make smaller weekly payments?
  • Consider a debt consolidation loan or a balance transfer credit card. You can move your high-interest credit card balances to a debt consolidation loan or a 0% APR balance transfer card. You will still pay interest on a loan or a fee on each balance transfer, but these costs are less than allowing credit card balances and interest charges to grow unchecked.

Can You Negotiate a Lower Credit Card Interest Rate?

It is possible to negotiate lower credit card interest rates with your card issuers to help you put a bigger dent in your debt.

“The higher the interest rate, the more of your payment goes to the creditor and not to your balances,” Richardson says.

Start with the card you’ve had the longest that has a strong payment history. You could also begin with the credit card that has the highest rate unless you haven’t had it long.

Call the credit card issuer and ask for a lower interest rate, explaining why you are seeking a reduction. Generally, issuers are amenable to interest-rate breaks, though Richardson says getting one may be easier for borrowers with low-risk behaviors. Low-risk borrowers tend to have low balances and don’t miss payments.

Ask politely what the issuer can do for you, Schmoll says. “Remind them of your history with them, especially if you’ve been a good customer,” he says. “If there are extenuating circumstances, explain that to them. The bank will obviously prefer earning a little less in interest over the potential of you defaulting.”

Sarah Goldberg
Sarah Goldberg

Sarah is a seasoned financial market expert with a decade of experience. She's known for her analytical skills, attention to detail, and ability to communicate complex financial concepts. She holds a Bachelor's degree in Finance, is a licensed financial advisor, and enjoys reading and traveling in her free time.

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